The price of Bitcoin (BTC) is continuing to pass up the $35,000 resistance level, falling below $30,000 briefly overnight on Jan. 22.

BTC has pared some losses since, bouncing above $31,500. At these prices, however, BTC/USD is headed for its worst week ever, losing over $5,000 in the by four days, every bit the bulls attempt to establish $32,000 as new support.

BTC/USD 1-week candle chart (Coinbase). Source: Tradingview

At that place are 3 main reasons why the price of Bitcoin dropped so steeply overnight. First, the options market was overheated with growing put options. 2nd, a critical resistance area was rejected. Third, the speed of the sell-off possibly led to a panic drop in a short period.

Options marketplace saw more than puts

In the options marketplace, there are two types of contracts: puts and calls. Puts are sell orders and calls are buy orders.

According to Laevitas, a data analytics platform, the options market has $three.1 billion in notional open up interest with near-term put volume rising. They said:

"1 week left until the 29JAN contract expires on Deribit Exchange with over $iii.1b in notional open interest. Max pain stands at $28k - the meme becomes reality? Put volume picking up since yesterday especially for about-term options."

Currently, the options marketplace accounts for around 33% of the futures marketplace's open interest. With over $3 billion in open interest, the options marketplace tin can have a meaning impact on the cost of BTC.

Bitcoin options traded contracts. Source: Laevitas

Critical resistance rejected, what'southward adjacent?

The $35,000 level was a disquisitional curt-term resistance area. As soon as BTC rejected the level, it speedily brutal below $xxx,000.

Scott Melker, a cryptocurrency analyst, said that Bitcoin swept the lows, even though it dipped beneath the previous back up area. Hence, if the bullish construction remains intact, a rally back to $35,000 is a possibility. He wrote:

"Equally usual, the wick went a bit deeper than expected, just it's post-obit the programme. Swept the range lows into the box, bullish SFP and motion up. Solid volume on the SFP. I drew this yesterday and shared it live, don't @ me virtually hindsight. Not out of the woods yet."
Bitcoin toll chart with central levels. Source: TradingView.com, Scott Melker

In the near term, traders volition probable exist watching the $35,000 level for confirmation of where BTC will be headed side by side.

Panic driblet

As the price of Bitcoin dropped below $33,500, the previous support level, a panic sell-off ensued. In fact, the Crypto Fear and Greed Alphabetize plummeted to "fearfulness" for the commencement time since October afterward spending months in "extreme fear."

A pseudonymous trader known as "Kaleo" emphasized that the market sentiment in crypto tends to shift apace. He said:

"If #Bitcoin dips to the depression 20Ks, it'll be only low enough that all of your friends and family who bought the past few weeks volition detest yous. They'll never desire to affect $BTC again... only to inquire if information technology's a good time to buy more at $50K or if they should wait for another dip."

Nevertheless, 1 bullish catalyst for Bitcoin in the near term is the continuous accumulation of BTC by Grayscale. On Jan. 19, the fund added a record 16,244 BTC ($607 million) in one day to its holdings or 18 times the amount of new BTC that's mined per day.